Ian Cowie was named Consumer Affairs Journalist of the Year in the
London Press Club Awards 2012. He has been head of personal finance at
Telegraph Media Group since 2008, having been personal finance editor
since 1989. He joined the paper in 1986. He is @iancowie on Twitter.

Lending spike could end mortgage famine and underpin house prices

A sharp increase in mortgage lending last month, following rate cuts from some of Britain’s biggest banks has prompted speculation about the end of the mortgage famine and fresh support for house prices.

The Council of Mortgage Lenders reports that gross mortgage lending in July increased by 8pc over the month before to £12.7bn. CML analyst Caroline Purdey was cautious about the significance of the increase: “Interpretation of recent trends continues to be challenged by one-off effects. We look forward to the September figures when the distorting effects of the Diamond Jubilee and the Olympics should largely have worked their way through.”

“We’ve seen five-year fixed rates fall to historic lows and expect more jostling for position in this marketplace. This should also lead to an increase in the number of homeowners remortgaging. Now there is a real incentive for many to take the plunge.

“It might be too early to call the end of the mortgage famine but there are certainly encouraging signs. What is essential is more help for first-time buyers with modest deposits in the form of more competitive and affordable rates.”

Brian Murphy at independent broker Mortgage Advice Bureau also saw grounds for cautious optimism: “We saw a strong return to activity levels last month, but the market is being affected by the usual seasonal factors.

“On a cumulative basis we are almost 5pc ahead of where we were last year, and the new Funding for Lending scheme has seen lenders introducing some competitive new products in the last few weeks.”

Against all that, Ashley Brown, director of independent mortgage broker, Moneysprite, pointed out: “There’s a lot of talk about distorting, one-off effects, but the real distortion in the market is far more fundamental: the lack of appetite among lenders for anything higher risk.

“There is activity in the mortgage market, but unfortunately not the right type of activity. Until lenders start lending consistently at higher loan to values, the mortgage — and subsequently property — house prices and sales are destined to cruise.”

Similarly, independent buying agent Gabby Adler, commented: “Transactions are well down on the peak of the market as the ongoing eurozone crisis and concerns over weak economic growth in the UK have a knock-on effect on consumer confidence.

“This missing confidence is key and until it returns, house prices on the whole will be flat and bump along the bottom, give or take a few variations from region to region.

“However, with the funding for lending scheme launching earlier this month, buyers should find mortgages start to become more affordable. Rates have already started to fall in anticipation of lower funding costs, and this is expected to continue well into the autumn.”

Nobody rings a bell at the bottom of the market but today’s CML figures may mark a turning point in institutions’ recovery from the credit crisis and a renewed willingness to provide mortgages to lower-risk borrowers.